CMA-Strategic-Financial-Management Practice Questions

Discuss whether AMI should use a cost-based or a market-based pricing approach. Explain your answer.

Essay

Food Depot Ltd, (FDL) is a privately-held company that provides catering services to airlines and operates several restaurant chains including fast food, casual dining, and fine dining restaurants, FDL has been profitable in recent years and has a very strong cash position. FDL's newest division. Food_TO-Go is an online meal ordering and delivery platform acquired by FDL two year ago.

In 20X7, sales for the entire company were $1 billion, with 50% of the business coming from the Airline Catering division. FDL is the country ‘s leading airline catering services provider and control 60% of the market share. However, the outlook of the airline catering industry is gloomy. The compound annual growth rate of the industry for the past five years was only 0.5% as airline networks have increasingly dropped catering on short domestic flights.

The Food-To-division only contribution 5% of FDL’s total sales in 20X7 and is far behind in competing for marketing for market share of the online meal ordering and delivery industry, it is estimated that Food-To-Go’s sales were only 20% of the industry leader’s sales. However, the outlook for the online meal ordering and delivery services industry is bright. The compound annual growth rate of the industry since it started three years ago was 50%. It is estimated the rapid growth of the industry will continue in the foreseeable future.

Susan Willey, the head of Food-To-Go, does not agree that the Airline Catering division is the best-performing division in the company. Wiley argues that ber division bad the highest ROI in 20X7, and it deserves more capital finding. FDL’s requested rate of return is 12%. The selected financial data for the Airline Catering division and Food-To-Go division in 20X7 are as follow (in $ millions)

Determine whether me €300 fee is a facilitating payment

Essay

Online Learning Inc. lOLI) is a privately-held company based in the IUC that specializes in providing online courses in English as a Second Language (ESL). OLI is trying to set up a new sales office in a foreign country. It needs a business license to operate in that country. The license normally lakes six months to obtain. An official of that country said that he could expedite the process for a fee of €300.

OLI estimates the new sales office can bring €300,000 incremental profit annually OLI has just launched a new online 40-houi course to help adult ESL learners master basic business English. The price of the new course is €500 per student, the variable cost is €300 per student, and the total fixed cost of the new course is €300.000 per year OLI spent €200.000 to develop the new course before launching it. There are many online course providers in the marketplace, and each has its own feature However, OLI's highly qualified staff and good reputation have enabled it to charge a premium price compared to its major competitors. Recent market research indicates that if OLI raises the price of its new business English course by 10V the student enrollment would decrease by 5V A regional airlines company in Asia has approached OLI and offered to enroll 1.000 of its employees in the new course if OLI would agree to a special price of €350 per employee If OLI accepts this offer, an additional €10,000 onetime cost would be required to temporally expand its capacity to accommodate the new students.

A corporation's board of directors has just declared its next regular quarterly cash dividend. The record date for this dividend will occur

It there is sufficient capacity to fill the order, which of the following are relevant for a special order decision?

On January 1, 2008 the exchange rate between the U S dollar (S) and Indian Rupee (Rs) was $t = Rs 39. 2676. On January 1, 2009 the rate was Rs 1 = $0,0205. Based only on the relative currency appreciation or depreciation, which country's exports would likely have increased?

Accounts receivable turnover increases from 4.0 times to 6.0 times. It all sales are on account when one of the following must decrease?

Southwest Supplies Inc. (SSI) is considering the following two projects with cash-flows discounted at SSI's weighted average cost of capital.

SSI can only afford to invest in one of the projects. Which statement would most likely explain why SSI would choose Project B over project A?

Radal inc. currently has three product lines: stationery computer supplies, and printer cartridges Based on the following information, the company is considering whether to drop the printer cartridge line.